AVX Corporation

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AVX Corporation

801 17th Avenue South
Myrtle Beach, South Carolina 29577

Telephone: (843) 448-9411
Toll Free: (843) 448-7139
Fax: (843) 448-7139
Web site: http://www.avxcorp.com

Public Company
Incorporated: 1972
Employees: 13,150
Sales: $1.14 billion (2004)
Stock Exchanges: New York
Ticker Symbol: AVX
NAIC: 334417 Electronic Connector Manufacturing

AVX Corporation is a global manufacturer of passive electronic components. The Myrtle Beach, South Carolina-based company is publicly traded on the New York Stock Exchange but is majority-owned by Japanese electronics giant Kyocera Corporation. AVX products include ceramic and tantalum capacitors, film capacitors, varistors, and nonlinear resistors. (Capacitors temporarily store electrical energy and are a vital component in the architecture of electrical or electronic circuits, filtering and conditioning electronic signals.) Markets served include automotive, consumer, data processing, medical, and telecommunications. AVX operates 20 manufacturing facilities located in 11 countries and maintains five research and development centers. In addition, AVX sells and distributes some of the electronic connectors manufactured by its corporate parent.

Lineage Dating to the 1920s

The history of AVX can be traced to 1922 and the founding of the Radiola Wireless Corp., an early maker of radios. The company changed its name to Aerovox Wireless Corp. and then shortened it to Aerovox Corp. AVX was formed as a subsidiary in 1972 to manufacture ceramic capacitors and in June 1973 took over the parent corporation after the other assets of Aerovox were sold. Also in 1973 Marshall D. Butler, the man most responsible for the growth of the company, was hired as chief executive officer and chairman. Butler had experience in the semiconductor industry: in 1957 he cofounded Alloys Unlimited Inc., which sold components and other materials to semiconductor makers. After the business was sold to a British company, Plessey Co., in 1970, Butler stayed on as president of the Plessey subsidiary, but after three years he had a falling out with the corporate parent over strategy and quit. He was soon recruited by AVX to jumpstart the company, which had enjoyed only modest success with electrical capacitors.

Butler quickly decided to focus on multilayer ceramic capacitors (MLCs), the kind used in the integrated circuits of semiconductors, a fast-growing area. Butler sold off two other operations to concentrate on the MLC market, with goals of ramping up production, cutting prices, and gaining a dominant market share. He launched a $20 million, five-year program that increased the company's production capacity by 20 times. Everyone in the capacitor industry realized that MLCs were gaining momentum but only AVX conducted in-depth market studies, which gave Butler the confidence to spend $20 million to win market share. By the time the rest of the industry understood what was happening, AVX had achieved a stranglehold on the market. In 1979 sales reached $95 million, well more than the $83 million target based on a projected growth rate of 30 percent a year. During this period AVX established a European operation, and in its efforts to sell products in Japan began a fruitful relationship with Kyocera. When Butler took over AVX he was saddled with a licensing agreement that did not allow the company to sell in Japan, while at the same time Kyocera could use AVX technology to sell into the United States. Butler complained to Kyocera, whose CEO, Kazuo Inamori, agreed that the arrangement was not fair and had the contract voided. In April 1979 AVX formed a subsidiary with Japanese partners to enter the Japanese market.

Steady Growth in the 1980s

AVX enjoyed steady growth through the early 1980s. In 1983 the company recorded sales of $160.9 million and net income of $8.7 million. Business remained strong through most of 1984, when AVX produced $235 million in revenues and net income topped $15 million, but by the end of the year semiconductor sales began to slump. In retrospect, it appeared that computer makers had bought more capacitors than they really needed during the early 1980s, a situation that led to a glut in the marketplace and an inevitable consolidation in the capacitor industry. AVX was well positioned to weather the storm and was able to grow larger by way of acquisitions. It also invested heavily in research and development during the late 1980s to develop the next generation of MLCs and noncapacitor products to help AVX in its efforts to diversify. By the end of the decade AVX was achieving some $450 million in annual revenues.

In the late 1980s Butler approached Inamori about forging a joint venture, with AVX manufacturing some Kyocera parts in Europe where the Japanese company lacked manufacturing capacity. By this stage, AVX had built up its European operations, which accounted for about one-quarter of the company's sales. Kyocera, on the other hand, generated less than 2 percent of its $2.5 billion of annual sales in Europe and was eager to expand its presence in the market before 1992, when internal trade barriers in the European Community would be curtailed. Rather than create a joint venture with AVX, however, Inamori offered to buy AVX. Because AVX would gain access to Kyocera parts to sell in Europe and have the financial backing of the Japanese company to fuel further growth, not to mention the cordial relationship that had existed between the two companies over the course of 15 years, Butler was agreeable to the idea. Kyocera had some regulatory hurdles in Japan to overcome, but in January 1990 Kyocera completed the $267 million stock purchase of AVX.

Butler continued to act as CEO until he retired in 1993, although he stayed on as a member of the board. He was replaced as CEO by Benedict P. Rosen, who had been with AVX since 1972, holding a number of executive positions. Unlike many purchases made by Japanese companies during this time, Kyocera's acquisition of AVX was a success for both parties. Sales reached $795.6 million in fiscal 1994 and approached $1 billion ($988.9 million) a year later. Net income for fiscal 1995 totaled $74.9 million. In large measure, this period of robust growth for AVX was due to expansion in the electronics industry and the growing popularity of personal computers and cellular telephones. There was an increased use of electronic components in the automotive, home appliance, and medical markets, as well as the need for capacitors in advanced electronic systems. AVX also prospered by distributing Kyocera products around the world. Moreover, AVX benefited from its relationship with Kyocera in less visible ways. Rosen told Forbes in 1995, "We never imagined we could make the kind of money we're making. Kyocera showed us how." The Japanese were especially helpful in improving manufacturing efficiency and controlling costs in general. Kyocera also helped AVX to enter the connector field, an area of electronics closely associated with capacitors. For its part, AVX used experience gained in Indonesia and Mexico to aid Kyocera in its efforts to set up manufacturing operations in those countries.

Kyocera turned to the public markets in 1995 to cash in on the success of its subsidiary in addition to the $62 million it had already received in dividends since buying the company. Kyocera sold about 25 percent of AVX, netting more than $557 million. Thus after five years Kyocera had all but earned back the money it spent on AVX and still owned the lion's share of the company. AVX received approximately $50 million from the offering, the money earmarked to fund the expansion of its ceramic and tantalum capacitor business as well as its entry into the connector field.

The second half of the 1990s was marked by cyclical reversals. For most of 1995 capacitor manufacturers could not keep up with demand, but as had been the case 20 years earlier, appearances proved deceptive. The real demand for capacitors fell far short of the perceived demand, a situation that resulted in swollen inventories that would take time to work through. Most companies, like AVX, ramped up production just in time to see the bottom fall out of the market in late 1995. For fiscal 1996, which ended on March 31, AVX posted sales of $1.2 billion and a net profit of $137.8 million, but because of oversupply problems and the resulting drop in prices, the company saw its revenues fall to $1.13 billion in fiscal 1997 and net income drop to $121.3 million. AVX resumed its growth in 1998 as the need for passive electronic components once again grew in response to the demand for personal computers and cell phones and the increased use of electronics by automakers. Revenues in fiscal 1998 reached $1.27 billion and net income improved to $137.8 million. But once again the company's momentum was checked by poor market conditions including an Asian currency crisis, the high cost of precious metals, and low prices caused by inventory reductions by major customers. To meet the challenge AVX attempted to control costs by cutting its workforce. In the end, sales held up, decreasing modestly to $1.24 billion, but net income was severely impacted, dropping to $41.5 million.

Demand for AVX products surged once again in 2000 across all markets, leading to favorable pricing. To keep up with demand, AVX added a plant in the Czech Republic and boosted production in its El Salvador facility. Although the price of palladium, a key raw material, was high, AVX was able to post strong results for fiscal 2000. Sales grew by a third to $1.63 billion and net sales rebounded, totaling close to $157 million. The company enjoyed an unprecedented boom period for the rest of calendar 2000 and into 2001. To meet the need AVX operated its 26 plants in 12 countries around the clock, but it was still unable to keep up with demand, most of which was driven by the telecommunications sector and the ubiquitous nature of cell phones. When fiscal 2001 ended on March 31, 2001, AVX recorded staggering numbers. Sales grew by 60 percent over the previous year to $2.6 billion, while net income soared to $567.6 million.

Company Perspectives:

The goal of AVX is Total Customer Satisfaction through continuous improvement.

Early 21st-Century Recession Forcing Retrenchment

The expectation was that demand would return to normal over the next year and a half, but even as AVX was finishing up the final quarter of a highly successful year, demand began to slow down dramatically in early 2001. The economy worldwide lapsed into recession, with the telecom sector particularly hard hit. Just as rapidly as AVX had taken steps to ramp up production, it now began to retrench, launching a cost-cutting initiative. The company tried putting employees on week-long hiatuses and cutting hours to avoid slashing the workforce, but as it became clear that business would not be rebounding in the near term, AVX finally began implementing long-term layoffs. The workforce that numbered 21,000 in December 2000 dropped to 12,500 a year later. When fiscal 2002 was completed, the balance sheet revealed a drop in revenues of more than 50 percent over the previous year to $1.25 billion. AVX also recorded some $60 million in restructuring and special charges, which led to a net loss of $7.2 million in fiscal 2002.

Poor business conditions lasted much longer than expected, leading AVX to make further job cuts and to begin shifting some production from the United States to such countries as the Czech Republic and China, where labor costs were significantly lower. In fiscal 2003 sales continued to slip, to $1.13 billion, as the company lost an additional $12.4 million. Although sales began to pick up during the close of fiscal 2003, it proved to be just a marginal improvement. Revenues improved slightly to $1.14 billion in fiscal 2004, but because of a number of restructuring charges the company took during the year, AVX posted a loss of $109.4 million for the year.

In 2004 there were strong indications that the cost of raw materials and pricing were stabilizing. If so, AVX could expect to enjoy a significant rebound. The company had no debt and had $718 million in cash investments at its disposal. With that money AVX was interested in making acquisitions, likely in the $50 million range, involving connectors or specialty connectors. Despite going on a roller coaster ride with much of the tech sector for the past decade, AVX appeared well positioned to enjoy a prosperous future when the demand for electronic products resumed its upward trend.

Principal Subsidiaries

AVX Tantalum Corporation; Elco USA, Inc.

Principal Competitors

KEMET Corporation; Murata Manufacturing Co., Ltd.; Vishay Intertechnology, Inc.

Key Dates:


The company is formed as a subsidiary of Aerovox Corp.


Marshall Butler is named CEO and chairman.


Kyocera Corp. acquires AVX.


Butler retires.


Kyocera sells a 25 percent stake in a public offering.


Sales total $2.6 billion, and net income amounts to $567.5 million.

Further Reading

Carroll, Paul B., "Kyocera Corp. of Japan Agrees to Buy AVX," Wall Street Journal, September 29, 1989, p. 1.

Easton, Thomas, "A Smart Japanese Buy," Forbes, November 20, 1995, p. 80.

Hussey, Allan F., "AVX, Ceramics Capacitor Maker, Cashes in on Fast-Growing Market," Barron's National Business and Financial Weekly, November 15, 1976, p. 40.

"How AVX Became No. 1 in Ceramic Capacitors," Business Week, October 29, 1979, p. 54J.

Lappen, Alyssa A., "Living Dangerously," Forbes, June 26, 1989, p. 100.

Silverman, Edward R., "Surging Computer Sales Charge Up AVX," Crain's New York Business, May 8, 1989, p. 15.

Ed Dinger